tv Nightly Business Report PBS July 5, 2011 7:00pm-7:30pm PDT
>> susie: with 28 days to go until the nation hits its borrowing limit, president obama calls lawmakers to the white house. >> it's my hope that everybody's going to leave their ultimatums at the door, that we'll all leave our political rhetoric at the door, and that we're going to do what's best for our economy and do what's best for our people. >> tom: the president aims for a big budget deal, not a stopgap measure, before the end of the month. it's "nightly business report" for tuesday, july 5. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> tom: good evening and thanks for joining us. with the united states rapidly running out of borrowing room, the president is calling on republicans and democrats to move quickly. mr. obama has called leaders from both parties to the white house for a meeting thursday and susie, he's urging them to think big. >> susie: tom, with the calendar pressuring politicians to negotiate a plan allowing the u.s. to borrow more money, the president wants a deal cut in a few weeks and says it should not be a temporary one lasting only a few months. >> tom: the budget bargaining now heads to the white house
with less than a month before time runs out. darren gersh reports. >> reporter: in brief remarks before reporters, president obama tried to set the right tone for the debt limit talks that will begin at the white house on thursday. the president says he is looking for a big agreement, not one that merely kicks the can down the road a few months. >> this will require both parties to get out of our comfort zones and both parties to agree on real compromise. i'm ready to do that. i believe there are enough people in each party that are ready to do that. >> reporter: a big agreement would trim trillions of dollars from deficits projected over the next decade. political economist andy laperriere expects something in the neighborhood of $2.4 trillion. finding the last couple of hundred billion will depend on just how much each side is willing to give. >> are democrats going to get the symbolic political victory of getting some revenue? are republicans going to get the symbolic political victory of getting some medicaid or medicare changes?
that's what is left to be determined. >> reporter: in the past, budget deals often hinged on finding the right formula to enforce an agreement. the president has proposed a trigger that reduces debt automatically if spending targets are not met. bill galston, a former policy adviser to president clinton, says those enforcement mechanisms rest on faith that politicians can keep promises they make. and that's the problem. >> i am afraid that level of political mistrust which now disfigures our political system makes rational, phased long-term legislation all the more difficult. >> reporter: budget analysts expect the talks at the white house are likely to cap so- called discretionary spending for at least two years. after that, analysts will evaluate the effectiveness of the plan based on how it enforces cuts are actually made. and that is not an easy task. >> in order to do that, you need to agree on two things. one is the mix of tax increases and spending cuts and second is the specific tax increases and
the specific spending cuts that would kick in if you didn't hit a target. well, if you can agree to those two things, you can probably agree on the broader issues. >> reporter: whatever agreement is reached, it will have to be soon. there is less than a month left until the federal government risks defaulting on its debt. darren gersh, "nightly business report," washington. >> tom: from american to european i.o.u.s-- a new page in the debt crisis overseas. moody's today cut its rating on portugal to junk, with a negative outlook. moody's fears portugal, like greece, will have trouble cutting costs and will need a second bailout. >> susie: meanwhile, an important meeting tomorrow to hammer out a bailout loan plan for greece. things were looking good for a deal until standard & poor's ratings agency warned the proposal to roll over greek government debt was in effect a "selective default." joining us now to explain what that means for investors, kenneth rogoff, professor of economics at harvard university.
>> nice to have you with us tonight. >> thank you. >> susie: so the deal that was worked out between international bankers. europe officials and the government to roll over. >> a new long term package and a soft restructuring, reprofiling. a voluntary rollover. but s&p says no matter how you look at it, this is a selective default. is this semantics or a default? >> it's a default. when you don't pay your debt on time and have to go to the lender and stretch it out and get new terms, this is a default. the barks ta are doing this voluntarily, they're not happy about it. they'd much rather get paid on time. >> susie: so there's a meeting in berlin tomorrow. what do you think is going to happen there? are they going to make progress sorting through this? what's the time table?
>> well, they're going to find a way to kick the can down the road to keep things going. the real question about greece is not if, but when. the europeans are just not ready to confront greece defaulting. you heard about portugal. there's ireland. people are worried about spain. they just don't know how to stop it. they don't want it to happen now. european regulators, politicians are heavily pressuring their banks to exloantend the loans to keep things going. as you see the riots in greece, and the demonstrations and anger. they're not going to keep up these payments and austert forever. this is just another day in what is going to be a long saga that will eventually end with a very clear defailt. >> susie: tell us what all of this means for american investors. this whole greek debt situation has been hanging over the market for a while. what is the key risk here?
>> the good news is that if you combine greece, ireland and portugal, they're not that big. they're important countries, but they're not that big, the economies. and germany and france really could absorb this. it's manageable. what we're seeing are bigger in the whole european experiment. the greeks don't like the austerty, and the concern is something bigger. when the default actually happens, it will not be like lehman brothers as some are saying. countries have defaulted again and again and again. it is not as unusual as what happened with lehman brothers. but the europeans could do anything. >> in a better scenario, you will get the risk over with. >> susie: another thing worrying investors is the whole job situation. we have the june employment
report coming out friday. the consensus is 115,000 jobs were created last month. does that sound about right for you? how does the job market look to you these days? >> well, it soublds about right. susie, if you're looking for a job t feels like recession, because unemployment is really high. we have just not come out of it. we'd like to be seeing 200,000. 300,000 jobs created every month for a couple of years to really start pulling us out of this. i do think the second half of the year ought to be bettered the affects go by. >> household debt. and government debt. there's an overhang on the economy. it's going to be a long, halting recovery. >> susie: thank you for coming on the program. we really appreciate it.
>> my pleasure. >> susie: we've been speaking with kenneth rogoff, proves of economics at harvard university. >> tom: here are the stories in tonight's n.b.r. newswheel: fresh off their best weekly gain in two years, stocks were narrowly mixed. the dow fell almost 13 points, the nasdaq rose nine, and the s&p 500 lost nearly two points. trading volume was light coming off the holiday weekend. 905 million shares on the big board and 1.5 billion shares on the nasdaq. a surge in new aircraft orders points to more health in manufacturing. the government says factory orders rose 0.8% in may after falling a bit more than that in april. today was day one for christine lagarde at the helm of the international monetary fund. she began her tenure as director of the global lending agency in washington d.c. lagarde will make just under $468,000 a year, plus she'll get an annual $84,000 allowance. and exxon mobil still is trying
to get a handle on cleaning up an oil spill in montana's yellowstone river. a foot-long portion of a pipeline burst friday. 42,000 gallons of oil gushed into the river before the pipeline was shut off. still ahead, getting people and packages from here to there. tonight's "word on the street"? "transportation." three stocks that may be picking up speed in the second half of the year. >> susie: while investors are obsessing about european debt problems, corporate profits will soon take center stage. earnings season starts next week, and second-quarter results are expected to be strong. still, there are new worries about the rest of the year. as erika miller explains, the stock market's direction could hinge on the hints c.e.o.s give about the rest of the year. >> reporter: there are plenty of reasons to fret about corporate profits in the second half of the year, but you wouldn't know it from the bullish wall street earnings forecasts for s&p 500 firms. analysts are forecasting
record profits this calendar year, even as economists ratchet down their expectations for growth in the second half. but u.b.s.'s mike ryan says the disconnect isn't as irrational as it seems. >> companies can still make money even in moderate or slow growth environments, partly because they have the ability to continue to raise productivity and cut costs. >> reporter: that's not the only reason for the earnings optimism. as analyst mike thompson explains, s&p 500 firms get nearly half of their revenues outside the u.s. >> even if the u.s. is growing at a below-trend rate, they can capitalize on high-growth economic output from other places. those firms get an additional boost in the form of a weaker dollar when their foreign profits are exchanged back into dollars. this year, the s&p 500 is expected to post its highest earnings ever-- over $97 a share. that would easily beat the current record of almost $88 a share earned in 2006. but much depends on whether the u.s. pulls out of its soft patch.
>> if you started talking about 1.5 or 2% growth, i think you'd revise the narrative significantly. that doesn't say that they won't be able to generate positive earnings growth. it just means that it won't be as robust. >> reporter: and of course there are plenty of concerns outside the u.s., including european debt woes and possible disruptions to oil supplies. but those worries haven't stopped the s&p 500 from rallying more than 5% in the past two weeks, and some analysts think stocks will keep climbing. >> as long as we get the earnings growth we are expecting this year, and are on track for next year, this presents a pretty strong support mechanism for equity markets continuing to grind higher. >> reporter: when companies start reporting second quarter numbers, investors will be more interested in hints about the second half. in particular, they want confirmation that a slowdown in u.s. growth won't mean a slowdown in u.s. corporate profits. erika miller, "nightly business report," new york.
>> susie: looks like investors came back from the holiday weekend a little cautious about investing in the markets, and sort of a see saw day all day, and in the late afternoon when the news about portugal and the debt downgrade from moody's, stocks went into a sell-off. >> early in the afternoon, all three of the major indices were in positive territory,
but they couldn't hold on to the gains. >> tom: clearly as erica just mentioned we've had a nice rally. let's get everybody up to date with the market post. >> tom: stocks ended the day mixed. a rebound in some commodity prices helped certain stock groups move higher. that's where we're going to begin. among those commodities finding buyers? oil. crude oil jumped about 2%, rising to almost $97 a barrel-- its highest price since mid- june. energy was the best sector today. no surprise. chevron led the dow industrial average, up 1%. all year long, shares have been able to find buyers when they drop to $98, as they did in february, may and last month.
the stock, by the way, is up more than 7% from its june low. nice move the last several weeks. two other leading energy stocks today are making deals. both peabody and national oilwell were up 2%. peabody is among a consortium getting the okay to develop one of the world's largest unexplored coal reserves. this one is in mongolia. varco will spend $772 million to buy ameron. that's a big maker of pipes used for oil and chemicals. the deal saw ameron shares really explode, up 28% on huge volume. look at this move higher. the deal values ameron at $85 per share. slightly below the closing price tonight. in may, ameron lowered its financial guidance because of a slow start to the year. an update on the fight for natural gas utility southern union. here's the upddate. shares jumped more than 4%. energy transfer equity upped its buyout offer to $40 per share. the market may be looking for a higher price. with southern at $42 per share,
energy transfer was up a fraction. the new price tops the offer from rival williams, which fell a fraction. a buyout in biotech sent shares of immucor rocketing higher-- up 30%. big volume, as you can imagine. a private equity firm will buy the blood testing products company for just under $2 billion, or $27 per share. penny below closing price. the financial sector was the biggest drag, held back by regional banks. the dallas-based comerica shed 3%. first horizon is from tennessee. it dropped almost 3%. citi cut price targets on both, citing pressure on earnings as interest rates stay low. the nasdaq was the only of the three major indices to close higher. the best nasdaq 100 stock was netflix. volume more than doubled as the stock ran up more than 8%. nice move here. this is an all-time for shares. it announced new internet streaming service in latin america and the caribbean as it
continues to expand globally. some wall street worries hit shares of medical device maker medtronic. the stock fell 3% on heavy volume. last week, a medical journal raised questions about a bone growth product and today wells fargo downgraded the stock. this is the past 180 sessions. a couple of decent rallies, but today's drop takes shares to their june low. florida real estate developer st. joe saw volume increase five-fold as it fell 9%. the securities and exchange commission has launched a formal investigation into how it values land. finally, back to where we started the focus-- commodities. silver jumped more than 5% after it dropped below $35 an ounce last week for the first time since may, when it was coming off this generational high. almost $50 a share. and that's tonight's "market focus."
>> tom: planes, trains and trucks are on the front lines of the economy. whether they're transporting business travelers or delivering packages, their business can be a leading indication of what's to come. that brings us to tonight's "word on the street," "transportation." gregg greenberg is a reporter at thestreet.com. >> craig, when you look at the transportation sektdor, the stocks have rebounded very fast from the june low. taking a look at the exchange traded fund following the transportation index. it sits just below a new high hit last week.
why all the optimism? >> you know in the transports, they lead them. and this portends good things for the second half. we've gotten pretty good economic numbers as of late. we'll see if that's confirmed later this week with the jobs number. i think there's a lot of optimism in the market. it's not with the political going on in washington or greece, however, from a market perspective things look good. >> clearly good with the transport sector over all. wabco makes parts for cars, and trucks. it's a bit off the most recent spring time high. why do they like it? >> it's going to be doing well in the emerging markets. a lot of emerging markets nations have to bring their trucks toup code to raise the standards to those we see in developed nations. and wabco makes braking systems and safety systems and they're a company that can do that. >> so that's in the truck
space. airlines have been the laggards of the overall group. but interesting, some of the fund managers do like aerospace suppliers. and trans digm makes aircraft components next to a new high tonight. >> the word is on trans digm they have a lot of pricing power. there's not a lot of makers in this space. so they have a lot of pricing power and showed it during the downturn. and some of the analysts say they're going to show it again. >> pretty impressive chart. and the company making the interiors of the airplanes has had a choppier chart, but again th, summertime has been pointed nicely. breaking above 40 in the $41 range. what's the catalyst? >> be has had a nice breakout. that was brought to my attention by brian arbtonburg. they have a lot of pricing power, and not a lot of
company doos what be does. they had a good paris air show recently where a lot of the airplane makers and providers get to show off their wares sdp, from all accounts it was quite a successful show over in paris. >> fair enough. how about any positions? are you allowed to own any of these? >> not allowed. no position. >> you can street the world on street.com. word on the street with greg greenburg. >> susie: here's what we're watching for tomorrow: we'll get the latest check on the service sector with the institute for supply management's june non- manufacturing index, and we'll see weekly mortgage applications and earnings from the wd-40 company. also tomorrow, hilary kramer is our "street critique" guest. email your questions to email@example.com. china has lost a fight on the global stage over raw materials used to make steel, aluminum and chemicals. the world trade organization
says china unfairly protected its own manufacturers by limiting exports of things like coke, bauxite and zinc. that drove up prices other nations paid for those raw materials. china claimed it needed to keep a lid on those exports to protect the environment. it may appeal the decision. >> tom: chrome is turning out to be golden for google. chrome is a web browser made by google. it continues gaining global market share. new numbers from stat counter show chrome now has just under 21% of web traffic. the largest share continues to come from microsoft's internet explorer with 44%. mozilla's firefox is at 28%. others, like apple's safari, and opera, make up the rest of the market.
>> susie: last night, our series "women in leadership" profiled dupont c.e.o. ellen kullman. well, that got tonight's commentator thinking about a small but growing group that includes kullman-- fortune 500 female c.e.o.s. here's sylvia ann hewlett, economist and founding president at the center for work-life policy. >> why are there so few women at the top of organizations on wall street and main street and elsewhere? in 2010, across the economy,
only 7% of top earners were women! its no longer a question of qualifications, commitment or track record. there's a ton of high-performing women in the pipeline these days-- fully 34% of the marzipan layer, that rich layer just below the chocolate, is female. rather its a question of sponsorship or, more precisely, lack of sponsorship. my new research shows that women are half as likely as men to have a powerful sponsor who will propel and protect them through the perilous straits of upper management. this is hugely problematic. the data show that those with sponsors are much more likely to get pay increases, and much more likely to get promoted, than those without. here's the brutal truth. no matter how brilliant you are or how hard you work, you won't get that coveted senior position unless someone with power in the organization knows you, believes in you, and is prepared to put your name forward and argue compellingly on your behalf.
i'm sylvia ann hewlett. >> tom: just a reminder: you catch us online at n.b.r. on pbs.org. lots of great content. >> susie: that's "nightly business report" for tuesday, july 5. i'm susie gharib. good night everyone, and goodnight to you too, tom. >> tom: good night susie. i'm tom hudson. good night everybody. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt